What Assets Are Protected in a Lawsuit?

Discover what assets are protected in a lawsuit and how Wood Law Group can help safeguard your financial future during legal challenges.

Protecting Your Assets From Lawsuits

 It’s a harsh reality that in the event of a lawsuit judgment against you, your hard-earned properties and financial resources can be at risk. Creditors may pursue your assets to satisfy a legal claim, and without proper protection, you could lose what you’ve spent a lifetime accumulating. 

This risk underscores the importance of early asset protection for anyone who owns assets, no matter how small.

Asset protection refers to the legal strategies that can be applied proactively to defend your wealth against such unforeseen legal claims. 

Asset protection usually only works when the asset owner takes positive and conscious steps to shield their assets from third-party threats. However, Nevada’s robust laws automatically shield certain types of assets so that they cannot be claimed by a judgment creditor (the lawsuit winner).

These laws and the assets protected under them form the basis of most asset protection plans, and understanding them is crucial if you hope to secure your estate from unforeseen legal troubles.

Our firm,Wood Law Group, recognizes the need to act and protect your assets long before any legal issue arises. With decades of estate planning experience, we can help you create legal barriers around your assets to preserve your financial stability and peace of mind.

Below, we explain some of the assets that are protected from lawsuits by Nevada law to keep you informed as you begin your asset protection planning journey. Please read on to learn more. We’d be happy to answer any questions you might have afterward.

Types of Protected Assets in Nevada

Generally, if you lose a court case and damages are awarded against you in favor of the other party, the other party is free to seize any asset you own to recover the amount awarded. However, the Nevada Revised Statutes( NRS 21.090) exempt certain types of assets from such seizures or execution after a lawsuit.

Some of those assets include: 

Homesteads: Nevada’s homestead exemption shields a portion of your primary residence (up to $605,000 in value) from execution. That means if your home is worth less than that amount, the judgment creditor cannot touch it for execution purposes.

However, if your home is worth more than that amount, the judgment creditor may be able to claim the excess value. The homestead exemption cannot also be used to avoid a forced sale if you used your home as collateral for a mortgage or any other kind of debt.

Individual Retirement Accounts (IRAs): An individual retirement account is a self-funded savings account that you can use to prepare for your future. This type of account is primarily used by those who do not have access to workplace retirement accounts such as the 401(k). 

IRAs with not more than $ 1,000,000 are protected from execution after a lawsuit under Nevada law. However, an IRA must be maintained according to the requirements stated in the Internal Revenue Code to qualify.

Life Insurance Benefits: Life insurance is an agreement between an insurance company and an individual (the policyholder). In exchange for premium payment, the insurance company undertakes to pay the policyholder’s beneficiaries a sum of money (death benefits) when the policyholder dies.

Life insurance policies are a good way to secure assets for one’s loved ones because the funds flowing from such policies are generally protected from income tax. The assets in a life insurance policy can also be passed directly to the beneficiaries when the policyholder dies without going through probate as long as the policyholder specifies the beneficiaries.

Under Nevada law, money, benefits, or privileges that flow from a life insurance policy are protected from lawsuits and execution by judgment creditors.

Social Security Benefits: Benefits to which an individual may be entitled under the federal Social Security Act are protected from judgment creditors, including

  • Social Security Disability Insurance benefits
  • Social Security dependents benefits
  • Supplemental Security Income.

Necessary Household Goods: Certain essential household goods up to $12000 in value belonging to a judgment debtor or their dependent are exempt from execution.

The properties in this category include:

  • Electronics
  • Furnishings
  • Clothes
  • Yard equipment
  • Other personal assets.

Trust Assets: A trust is a legally binding arrangement that allows a third party to hold the grantor or trust creator’s assets for the benefit of specified beneficiaries.

Different types of trusts serve different purposes. Certain types of trusts, such as domestic asset protection trusts, are invaluable in safeguarding assets from future creditors. The proceeds of such trusts are also exempt from execution after a lawsuit, making them a secure way to preserve your assets for your loved ones and future beneficiaries.

Common Asset Protection Strategies

Unfortunately, the above statutory automatic protections have several limitations and may not be sufficient to secure your entire estate and business assets from lawsuits. Comprehensive asset protection planning is needed to ensure your entire estate is shielded from unforeseen circumstances.

There are several asset protection strategies or techniques that can help you protect your assets from lawsuits and other possible threats and secure your financial future, beginning with comprehensive estate planning. Through the estate planning process, you’ll be able to clarify your asset protection goals and execute the necessary legal instruments to secure your assets before any third-party claim arises.

Other asset protection strategies mostly involve converting assets to any of the forms protected by law or transferring them to a different legal entity, such as a trust or limited liability company.

Setting up trusts or limited liability companies could be complex because these asset protection vehicles are strictly regulated by law. Therefore, to ensure maximum protection, such strategies should only be adopted under the guidance of a skilled estate planning or trust lawyer.

Fraudulent Transfers: A Word of Caution

Asset protection measures work best if implemented long before the need arises. If you attempt to transfer assets to an asset protection trust or any other legal entity for asset protection purposes after a lawsuit has been filed against you or a third party’s claim against your assets has been established, such a transfer may be deemed a fraudulent transfer under the law.

A fraudulent transfer can be set aside to ensure the judgment creditor recovers what they are owed, making your asset protection efforts ineffective. Therefore, the time to begin asset protection planning is now.

The Role of a Skilled Attorney in Asset Protection Planning

An asset protection lawyer is invaluable if you wish to safeguard your assets to the maximum extent possible.

Asset protection lawyers understand the laws and regulations surrounding the asset protection planning process. They can assess your case and help you formulate a comprehensive asset protection plan with tailored strategies to suit your unique situation.

With an asset protection lawyer, it is easier to spot the limitations of each asset protection strategy and address them long before it becomes a problem. That way, you can rest easy, knowing that your assets are safe from external threats.

Why Choose Wood Law Group? 

At Wood Law Group, we pride ourselves on our legal competence and proficiency, which are born out of decades of estate planning and probate experience. Using a combination of sophisticated legal strategies, we can help you achieve your goals and protect your assets against lawsuits, creditors, and judgments.

We understand that asset protection is not a one-size-fits-all endeavor. It’s a path that is deeply personal for each client, requiring a bespoke plan. That’s why we meticulously craft asset protection plans that align with each client’s unique needs, whether it involves establishing various types of trusts or creating designated savings accounts. We hope to be able to do the same for you.

Our work also extends to probate and estate administration, ensuring your assets are protected and properly managed even after you’re gone. You can trust us to stand by you and help you actualize your wishes for your estate and the future of your loved ones when you’re no longer around.

Get in Touch With Us

Understanding which assets are shielded during a lawsuit is paramount in the asset protection landscape. However, relying on the automatic statutory protections is not enough. Proactive asset protection measures are also essential to effectively protect your assets and keep them beyond the reach of judgments.

At Wood Law Group, our team is prepared to develop a personalized asset protection strategy for you so you can preserve your hard-earned assets for the future.

Schedule a consultation with us today. Let us work together to secure your legacy and provide you with the tools to withstand any legal storms on the horizon.